Wednesday, August 1, 2018

Foreign tourists aren't coming to China, and it is hurting the economy

Most foreign residents in China seem to agree that the country has become a less easy place for outsiders to navigate over the last few years. From renting a house to accessing banking services, having a foreign passport rather than a Chinese ID is becoming more and more of a liability. This is probably part of the reason that the number of foreigners living in China is still pretty tiny, and not really increasing very fast either. I would argue that this is not to the country's benefit, although this can be a hard point to sell in China. 

It has become apparent, however, that there is one area where China's refusal to make more accommodation for foreigners is causing an immediate, tangible damage to the country's economy, and that is tourism. Over the last couple of years, various analysts have noted that China's current account balance has been hard hit by the gap between inbound and outbound tourism. To put it simply, there are currently far more Chinese travelling abroad than there are foreign tourists coming to China.

In 2017 Chinese tourists made 130 million trips abroad, spending a total of 115.29 billion US dollars. In the same year, the number of foreigners taking trips to China fell just short of 30 million. For a country of China's size and heritage, this is not a very impressive figure. By way of comparison, Thailand received over 35 million visits in the same year, Japan got over 28 million, and even not so glamorous Vietnam still managed 12 million.

It isn't hard to see why China receives few visitors. The unnecessarily restrictive visa regime for foreign tourists is one major factor. In a world where more and more countries allow visa-free travel (at least for citizens of developed countries), China is definitely not going down this path. While Americans, Brits and a few other nationalities are able to receive multiple entry tourist visas as part of reciprocal deals, citizens of most countries are generally given one-month visas. This is dependent on showing that they have tickets both to enter and leave China, and presenting evidence of hotel bookings for the entire duration of the trip.

For most individual travellers this is a burdensome requirement, based on the assumption that they have planned out their entire trip in advance. For young backpackers on their gap year trips around the world, this may well be reason enough to stay away from China all together. 

Then there is the hassle of getting around China as a foreign tourist. This has become much harder in recent years, precisely because of the same set of factors that have made life more convenient for long-term residents. Essentially, almost everything in China is now arranged and paid for through an ecosystem of smartphone apps that is very hard for outsiders to access. From cabs to cinema tickets, phone bills to airplanes, there is almost nothing that cannot be booked through your phone and paid for using WeChat.

Trying to do things the old way can be tricky, more expensive or downright impossible. For example, waving down a taxi on the street has become much harder in Chinese cities, since everyone uses Didi to hail a car. But you cannot use Didi unless you can pay with WeChat or Alipay, and you cannot do that unless you have a Chinese bank account. WeChat used to allow you to use its "wallet" function even without linking it to a bank account, but this is no longer possible (probably due to "security concerns").

For travellers not planning to open a Chinese bank account (which is generally impossible on a tourist visa anyway), getting around an already puzzling country has become a lot harder. Fortunately it is still possible to pay in cash in most establishments, although even this could soon start to change (I already know of one restaurant in Beijing that only accepts mobile payments).  

Then there is the truly incredible fact that a large proportion of Chinese hotels do not accept foreign guests as a matter of policy. This is the case even in cities like Beijing and Shanghai. While a few decades ago hotels needed a special license to accept foreigners, and only the high-end ones generally received it, nowadays all hotels could do so in principle. Quite simply many establishments do not want the hassle of having to register foreign guests with the local police, or do not know how to go about it, and so they just reject all foreigners. Although any Chinese city will still have hotels where foreigners can stay, this state of affairs represents a serious annoyance for the independent traveller, especially since it is the cheaper places that are most likely not to accept foreigners.

All in all, what emerges is the picture of a country that is simply not trying very hard to make itself welcoming to short-term visitors, even though this is actually costing it economically. The omnipresent sense of national pride and the state's growing security paranoia remain the best explanations. The strict visa regime is probably seen as a response to other countries' strict requirements for visiting Chinese citizens. The situations are not really comparable though: while most rich countries have a justified fear of illegal immigration, the chances of visitors from places like Australia or Germany overstaying their visas in China is almost non-existent (and they would hardly be able to lay low for very long, given the country’s omnipresent surveillance). The same sense of pride, the increased regimentation and control and the perceived need to monitor foreigners’ movements makes it hard to imagine changes to the rules that make China difficult for independent travellers, although many of them could be changed quite easily with some good will.

The fact remains that China’s diminishing capital account surplus is a serious source of concern for the government, and the large imbalance between how much Chinese tourists spend abroad and how much foreign tourists spend in China is a significant contributing factor (although obviously not the only one). Given that it is no longer politically feasible to restrict the majority of Chinese citizens from travelling abroad, there is little that could be done about this except opening up more to foreign tourism. 

Even within China, some have now begun to call for more openness. At the recent ITB conference in Beijing, Ctrip founder and co-chairman James Liang called for the government to make China more attractive to foreign visitors. He recommended relaxing visa policies, pointing to a study by the World Tourism Organization showing that only five countries worldwide have more restrictive visa policies than China, those countries being Angola, Gabon, Nigeria, Pakistan and Saudi Arabia. He noted that Turkey, which allows visa-free access for nationals of 78 countries, managed to attract more international visitors than the whole of China in 2017. He also recommended that the government build more museums and further develop airports and railway travel (this last suggestion might seem a bit superfluous).

While this is encouraging, I can't really see much being done to make China more inviting for foreign travellers any time soon. In the near future, tourism is probably going to remain one field in which China haemorrhages money towards the outside world.